Exit wounds

Thinking through the consequences of announcements on economic issues is hardly a feature of the Gillard government. And so it is with the recent announcement that superannuation payments are likely to be taxed (“Super class war hits investors", AFR, February 2).

Superannuation taxes are generally either 15 per cent or 30 per cent. With concessional contributions now taxed at up to 30 per cent on entry, even the lower 15 per cent rate on exit takes the aggregate close to the top marginal tax rate, destroying any incentive for retirement provisioning via superannuation. As undeducted superannuation contributions are made from funds that have already been fully taxed, any exit tax is just a deferred increase in the marginal income tax rate.